Bank of New Zealand (Security Trustee) v The vessel My "Island Escape" (No 2)

The case of Bank of New Zealand (Security Trustee) v The vessel My "Island Escape" (No 2) involved the sale of a vessel, My "Island Escape," by the Admiralty Marshal under judicial sale orders. The dispute arose as the highest bid for the vessel was below its estimated valuation, raising questions about whether the Court should order the sale to the highest bidder despite the underbid. The legal issues included the duty of the Admiralty Marshal to obtain the highest price for the sale, the duty to conduct a fair sale process, and whether the Court should direct the Marshal to depart from the established closed bid tender process. The Court had to balance the competing duties of the Marshal and ensure public confidence in the judicial sale process.

The Court concluded that the duty to obtain the best possible price for the ship did not authorise the Marshal to depart from the equally important duty to conduct a fair sale process. The Court emphasised that even if a departure from the sale process could result in a higher price, it was not permissible if it compromised the fairness of the sale. The Court also noted that the highest bid, while below the valuation, was still a legitimate bid in the context of a judicial sale where the value of the vessel was viewed as "distressed." The sale process, including the closed bid tender, had been followed correctly, and the bids reflected the challenging market conditions for the vessel.

Accordingly, the Court ordered the Admiralty Marshal to accept the tender of the highest bidder, Paspaley Pearling Company Pty Ltd, for the sum of USD 5,500,000. The highest bidder was required to pay 10% of the purchase price by 17 February 2023, and the balance plus any adjustments by 24 February 2023. The case management hearing was set for a later date to consider any applications for continuation or dissolution of non-publication orders and further directions regarding the management of the proceedings.

The final orders mandated the acceptance of the highest bid, payment terms for the purchaser, and set a date for further case management hearings. The Court's decision underscored the importance of adhering to the judicial sale process while also recognising the practical realities of selling a distressed asset in a limited market.